Dollar flocks amid Venezuelan panic
Traders are flocking to the dollar amid uncertainty over Venezuela's future, following the US arrest of Maduro and President Donald Trump's statements about Washington's intention to "take over" the South American nation.
A series of anticipated US economic reports this week are expected to impact the dollar's performance, including inflation and non-farm payroll data.
Other factors influencing the dollar
What’s happening:-
The euro fell against the US dollar at the start of the new year, after recording sharp gains in 2025.
What happened:-
Investors responded to the latest economic reports released on Friday and focused on the monetary policy outlook from the Eurozone and the US.
The US dollar remained steady through the weekend, even as President Donald Trump approved a military operation to capture the Venezuelan President Nicolás Maduro.
US dollar price
Why it matters: -
The US dollar started the week with a rally, climbing to a more than three week high versus the euro, as forex traders largely looked past the capture of President Nicolas Maduro by the US and Venezuelan Vice President Delcy Rodríguez being sworn in as interim president.
The European Central Bank signalled that interest rates are likely to remain on hold for the time being, given resilient GDP growth and inflation rate coming close to the bank’s target.
President Donald Trump is expected to name a new Federal Reserve Chairman in May, raising speculations of a more dovish monetary policy stance. The Federal Reserve slashed its benchmark rates by 25 basis points in December, taking rates down 75bps in the year, amid elevated inflation levels and a cooling labour market.
Data released on Friday showed the HCOB Eurozone manufacturing PMI declined to 48.8 in December, from November’s reading of 49.6. The latest release came in lower than the preliminary reading of 49.2 and signalled the fastest contraction since March amid a plunge in output and new orders.
Germany logged the steepest decline in manufacturing activity, also recording the weakest performance since February. Spain and Italy also remained in the contraction zone, while France’s manufacturing activity bucked the trend to record its strongest growth since June 2022.
Eurozone’s bank lending to households surged 2.9% year-over-year to €7.094 trillion in November, signalling the fastest growth pace since March 2023 and beating market estimates of 2.8%. The acceleration in lending reflected a continued rebound in credit demand, following the recent monetary-policy easing by European Central Bank.
US dollar
Strength in the US dollar weighed on the EUR/USD pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.1% to 98.43 on Friday.
The EUR/USD forex pair fell more than 0.2% to 1.1721 on Friday, while the EUR/GBP pair declined almost 0.3% to 0.8709.
What to watch:-
Investors will continue monitoring the ECB’s policy outlook, which is expected to provide direction to the Eurozone’s common currency.
Data on HCOB Composite PMI (1300 UAE Time) and HCOB Services PMI (1300 UAE Time) will be released on Friday. Analysts expect the HCOB composite PMI to decline to 51.9 in December from 52.8 in November, while the services PMI is projected to fall to 52.6 in December from 53.6 in the previous month.